New ETF Book by Larry Connors - Click here to read more
The Palo Alto, California-based company reported fourth quarter preliminary GAAP and non-GAAP earnings of $0.84 per share and $1.03 per share, respectively. Analysts polled by First Call / Thomson Financial expected the company to earn $1.00 per share for the quarter.
"HP delivered another solid quarter as it continues to benefit from its global reach, diverse customer base, broad portfolio and numerous cost initiatives," said Mark Hurd, HP chairman and chief executive officer. "Our ability to execute in a challenging marketplace differentiates HP, enabling it to increase share, expand earnings and emerge from the current economic environment as a stronger force."
However, analysts feel HP's results should not be viewed as an indicator of the whole technology sector. They argue the threat of a consumer pullback is real and present and it was highly unlikely that companies large and small can bypass the structural weakness on the consumer side. Although, companies like HP and IBM, with their broader portfolio and geographical reach, can weather the storm better than others.
While earnings at HP were better than expected for fourth quarter and guidance for next year was above expectations, the company's revenue guidance for the first quarter and next year was below expectations.
Also, the company had a better than expected 19% revenue growth for the fourth quarter, but that was boosted by currency...without currency translation, HP's revenue growth was 16%, below the 17% growth analysts were looking for. What's more, revenue benefited from the newly acquired Electronic Data Systems Corp. HP completed the purchase of EDS in August. Without this and without currency translation, revenue was up just 2% - so core business might still be seeing a slowdown. HP's revenue growth was 10% in the third quarter.
HPQ has been cutting jobs as part of EDS integration. The company said in September that it planned to cut about 24,600 jobs, or about 7.5% of its work force, over the next three years as part of EDS integrating the business. So that probably helped margins, leading to better earnings performance despite sluggish revenues.
The ongoing economic crisis and its devastating impact on consumer spending came to the fore once again on Tuesday when specialty glass maker Corning Inc. (GLW | Quote | Chart | News | PowerRating) said withdrew its previously issued financial outlook for the fourth quarter and 2009, citing waning demand for glass used in LCD televisions and desktop monitors.
Large technology companies, which until recently remained unscathed from the impact of the ongoing economic crisis, have started feeling the pinch, as a protracted economic slump and the recent financial market turmoil have forced corporates to cut down on their technology spending.
In recent days, many technology companies have announced plans to cut jobs and restructure their operations to reduce costs. Many have issued profit warnings for the current quarter and the full year.
Market research firm Gartner, Inc. (IT | Quote | Chart | News | PowerRating) said last month that IT spending would slow in 2009, as global economic problems are impacting IT budgets.
Peter Sondergaard, senior vice president at Gartner and global head of Research, said, "Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat."
With the Eurozone and Japan slipping into recession and the U.S. heading for it, the outlook for technology companies remains gloomy.
Nokia Corp. (NOK | Quote | Chart | News | PowerRating), the world's biggest maker of mobile phones, on Friday lowered its outlook for industrywide mobile device volumes for the fourth quarter and the full year 2008, citing a sharp pull back in global consumer spending amid the global economic slowdown and unprecedented currency volatility.
Also on Friday, software and computer server maker Sun Microsystems Inc. (JAVA | Quote | Chart | News | PowerRating) said it plans to slash up to 6,000 jobs, or 18% of its global work force, as it scrambles to cut costs to offset a devastating slump in sales of its high-end servers.
Intel Corp. (INTC | Quote | Chart | News | PowerRating), the world's biggest chipmaker, last week lowered its fourth quarter revenue forecast, citing significantly weaker than expected demand in all geographies and market segments.
Intel's announcement came soon after chipmaker National Semiconductor Corp. (NSM | Quote | Chart | News | PowerRating) lowered its second quarter revenue forecast and announced plans to cut 330 jobs, and semiconductor equipment maker Applied Materials Inc. (AMAT | Quote | Chart | News | PowerRating) reported a 45% drop in fourth quarter profit and said it will cut 1,800 jobs.
Earlier this month, Gartner reduced its estimate for semiconductor industry growth in 2009 to 1% from nearly 8%, citing the impact of the economic crisis.
Also this month, Cisco Systems, Inc. (CSCO | Quote | Chart | News | PowerRating), the world's largest computer networking gear maker, reported first quarter profit that remained essentially flat with last year even as sales increased 8% in what it called a very a challenging global economy. However, Cisco chief executive John Chambers warned on a conference call that the company's second quarter sales could fall 5% to 10% from a year ago.
Texas Instruments Inc. (TXN | Quote | Chart | News | PowerRating), the world's second largest maker of mobile phone chips, last month reported a 27% drop in third quarter profit and forecast fourth quarter revenue and earnings below analysts' estimates. The company also said it was in talks with potential buyers to sell part of its wireless operations.
Even Microsoft Corp. (MSFT | Quote | Chart | News | PowerRating) could not buck the impact. The software giant last month reported first quarter profit that rose a modest 2% from last year, as revenue growth slowed amid the challenging economic environment. The company forecast second quarter revenue and earnings below analysts' current consensus estimates and lowered its revenue and earnings forecast for the fiscal year 2009. Microsoft said its outlook reflects a balance of risks and the likelihood of a continued economic slowdown.
For technology companies, the widening financial mess could result in greater difficulties securing financing for acquisitions and tighter lending conditions for basic corporate operational mechanisms such as line of credit. Combined with the deteriorating consumer confidence and reduced technology spending by corporates, the sector is bound to suffer more in the near future.
In this gloomy atmosphere, however, HP's preliminary results may be seen as a silver lining in the cloud.
For comments and feedback: contact editorial@rttnews.com Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
15260 Ventura Blvd., Ste. 2200
Sherman Oaks, CA 91403
© Copyright 2009 The Connors Group, Inc.
